Contents

1.0 Introduction ............................................................................................................................... 1

1.1 Issue....................................................................................................................................... 1
1.2 Origin of the Report .............................................................................................................. 2
1.3 Objective: .............................................................................................................................. 3
1.3.1 Broad objective: .............................................................................................................. 3
1.3.2 Specific objectives: ......................................................................................................... 3
1.4 Scope: .................................................................................................................................... 3
1.5 Limitation: ............................................................................................................................. 3
1.6 Methods of data collection .................................................................................................... 4
1.7 Data Analysis Techniques ..................................................................................................... 4
2.0 Company Overview .................................................................................................................. 4
2.1 Ejab Group and its Business Units ........................................................................................ 4
2.2 Vision, Mission & Objective ................................................................................................. 9
2.2.1 Vision.............................................................................................................................. 9
2.2.2 Mission ........................................................................................................................... 9
2.2.3 Objectives ..................................................................................................................... 10
2.3 Corporate Social Responsibilities (CSR) ............................................................................ 10
3.0 Research Part .......................................................................................................................... 11
3.1 Literature Review ................................................................................................................ 11
3.2 Analysis ............................................................................................................................... 12
3.2.1 Composition of Balance Sheet: Himadri Limited ........................................................ 12
3.2.2 Composition of Balance Sheet: Golden Harvest Agricultural Industries Limited
(GHAIL) ................................................................................................................................ 14
3.2.3 Assessment of Financial Ratios .................................................................................... 16
4.0 Findings................................................................................................................................... 29
5.0 Recommendations and Conclusion ......................................................................................... 32
Appendix ....................................................................................................................................... 33
Reference ...................................................................................................................................... 41

1.0 Introduction
1.1 Issue
All the strategic business units of Ejab Group including Himadri Limited are private limited
companies. This a medium sized firm. Currently it has 7 potato cold storages all in the North of
Bangladesh, in Rangpur, Shibganj, Upson (Bogra), Battoli (Khetlal, Joypurhat), Jagannathpur
(Thakurgaon), Gobindaganj (Gaibandha) and Komorpur (Birganj, Dinajpur). Future plan is to
increase the number of cold storages in different locations of Bangladesh and also expand the
product range of items that can be stored other than potatoes like some fruits and vegetables.
Golden Harvest Agro Industries Limited, on the other hand, is a public listed company that owns
and controls the countrys first frozen food processing plant. Although Himadri Limitied and
Golden Harvest Agro Industries Limited are operating in similar industries, Golden Harvest Agro
Industries Limited is huge. The companys supply process links directly or indirectly with over
100,000 Bangladeshi agricultural partners who provide 95% of the companys raw materials. This
nationalistic approach has satisfied the companys duty to its domestic economy and values whilst
exporting products and services in the global market. Golden Harvest Agro Industries Ltd
(GHAIL) processes over 75 varieties of premium quality frozen food products of vegetables, ready
to eat foods, finger foods and more. The facility is an ISO 9001:2008 and BRC (British Retail
Consortium) certified. Golden Harvest Agro Industries Ltd. is the countrys leading frozen food
supplier possessing an extensive network of temperature controlled fleet transportation system.
The company distributes nationwide and exports to USA, Canada, Australia, Middle East and the
European countries, maintaining a temperature of -18 C. Golden Harvest Agro is currently setting
up the nations first ever largest cold chain network under the GDA program with the support of
USAID. The project is estimated at over 50 million USD.
A private limited company has its merits and demerits in terms of financial performance. Similarly,
a public limited company has its unique pros and cons as well. There are differences in their
financial performances. Financial performance is a subjective measure of how well a firm can use
assets from its primary mode of business and generate revenues. This term is also used as a general
measure of a firm's overall financial health over a given period of time, and can be used to compare
similar firms across the same industry or to compare industries or sectors in aggregation. There
1

are many different ways to measure financial performance. Line items such as revenue from
operations, operating income or cash flow from operations can be used, as well as total unit sales.
Financial ratios are the best tools for measuring financial performance. This study will endeavor
to unveil the differences in financial performance of Himadri Limited as a private limited company
and Golden Harvest Agro Industries Limited as a public limited company. In simple words, how
good Himadri Limited is doing as a medium private limited company compared to Golden Harvest
Agro Industries Limited, a large public limited company will explored with the help of few key
financial ratios.
1.2 Origin of the Report
Internship Program is a graduation requirement for the BBA students of BUP. This study is a
partial requirement of the Internship program of BBA curriculum at BUP. The main purpose of
internship is to get the students exposed to the corporate world. Being an intern, the main challenge
is to translate the theoretical concepts learned in classrooms into real life experience in real life
working environment.
The internship program and the study have the following purposes:
i.

To get knowledge of the job responsibilities of our respective fields

ii.

To experience the real corporate world

iii.

To compare and use what we learned in classrooms in real life scenario

iv.

To fulfill the requirement of BBA Program

This report titled Comparative Study of Financial Performance between Himadri Limited A
Concern of Ejab Group and Golden Harvest Agro Industries Limited is the result of 10 weeks
long internship program conducted at Ejab Group and is prepared as a requirement for the
completion of the BBA program of BUP. This report is based on and includes information acquired
during the internship period at Ejab Group.

1.3 Objective:
1.3.1 Broad objective:
To compare the financial performance of Himadri Limited and Golden Harvest Agricultural
Industries Limited
1.3.2 Specific objectives:
i.

To calculate out the key financial ratios of Himadri Limited

ii.

To calculate the key financial ratios of Golden Harvest Agro Industries Limited

iii.

To interpret the ratios and compare the firms using the interpretation of the ratios

1.4 Scope:
The scope of the research is limited to the Agricultural and Food Processing sector of Bangladesh
and the findings and results of the research are applicable to only Himadri Limited and may not
apply to other similar or competitive companies. The main focus will be to compare the financial
performance of Himadri Limited and Golden Harvest Harvest Agro Industries Limited primarily
using ratio analysis.
1.5 Limitation:
The limitations faced in preparing the report are:
i.

Time: The report has to be completed in 10 weeks. This time is insufficient for preparing
a standard report with high precision.

ii.

Resource: As the research is self-funded, the collection of specific data was done on a
limited scale.

iii.

Availability of Data: Much of the company and market reports are not easily available.

iv.

Accessibility: As Himadri Limited is a private limited company, Ejab Group was reluctant
to disclose any information in order to maintain confidentiality.

v.

Researcher: As a novice researcher, I have a lack of experience, expertise and knowledge.

3

1.6 Methods of data collection

All the data used in this report are collected from secondary and tertiary sources like company
reports and information available in internet. The analysis used in this report is based on mainly
qualitative analysis.
1.7 Data Analysis Techniques
After the data has been collected the following financial analytical tools has been used to compare
the financial performance. The tools that used are as follows:
a. Key Profitability Ratios:
i.

Gross Profit Margin

ii.

Net Profit Margin

iii.

Return on Assets

iv.

Return on Capital Employed

b. Key Liquidity Ratio

i.

Current Ratio

c. Key Financial Position Ratios

i.

Capital Gearing Ratio

ii.

Debt Ratio

iii.

Interest Cover

d. Key Efficiency Ratio

i.

Asset Turnover Ratio

2.0 Company Overview

2.1 Ejab Group and its Business Units
In the year 1959, Late Engineer Ejabuddin Ahmed gave birth to Ejab Group with the establishment
of National Construction Company (now defunct), National Jute Mills Limited (1968) and over
the years gained recognition with Himadri Limited (1974), a potato cold storage and finally Rabeya
Flour Mills Limited in 1978.

Involving itself in the fields of Jute based products, Edible Oil Mill, Rice Mill and Potato Cold
Storages, Ejab Group went a step ahead with adding wide range of processed food products.
Adding another new venture is its own Seed processing expertise by which we produce potato,
rice, maize, wheat and vegetable seeds. Through our distribution network, we not only distribute
our own products but also distribute Cepsa Lubricants, a product of Spain. The group is also
involved in Real Estate and Housing Development under the name of Ejab Developers Ltd. (EDL).
Based on the increasing changes in the consumer behavior, Ejab Group is open to take any
necessary changes and steps to help enhance its business policies and planning. With a
commitment to provide social services through its products, Ejab Group strongly adheres to its
motto: "No Compromise with Quality". In its existence of over 50 years, Ejab Group has branched
into 11 Companies under its four divisions.
The four divisions are:
A. Agro Division
B. Food Division
C. Real Estate Division
D. Distribution Division
The 11 Companies are:
A. Himadri Ltd. (1974) 6 Units
B. Rabeya Flour Mills Ltd. (1980) 2 Units
C. Northern Agricultural & Industrial Co. Ltd. (2002) 4 Units
D. Multipurpose Himadri Agro Processing Co. Ltd. (2005) 2 Units
E. Ejab Alliance Ltd. (2005) 1 Unit
F. Ejab Foods Ltd. (2006) 3 Units
G. Ejab Trading Co. Ltd. (2006) 1 Unit
H. Ejab Developers Ltd. (2006) 28 Units
I. Ejab Distribution Ltd. (2007) 1 Unit
J. Ejab Agro Ltd. (2010) 2 Units
K. Munchy Food & Beverage Ltd. (2011) 1 Unit
5

A. Himadri Limited
Himadri Limited and Multipurpose Himadri Agro- Processing Co. Ltd currently have 7 potato
cold storages all in the North of Bangladesh, in Rangpur, Shibganj, Upson (Bogra), Battoli
(Khetlal, Joypurhat), Jagannathpur (Thakurgaon), Gobindaganj (Gaibandha) and Komorpur
(Birganj, Dinajpur). Future plan is to increase the number of cold storages in different locations of
Bangladesh and also expand the product range of items that can be stored other than potatoes like
some fruits and vegetable.
B. Ejab Agro Ltd.
Ejab Agro Ltd. (formed in 2010) is involved in following activities: Tissue Culture Lab, seed
production and marketing. The products of this company are potato plantlet, potato mini tuber,
potato seed of different generation (starting from basic to certified), high yielding rice seed, hybrid
rice seed, etc. although our seed business started in 2007 under the banner of Northern Agricultural
& Industrial Co. Ltd. But eventually Ejab Agro Ltd. was formed to give it more focus and emphasis
on the seed business. It sincerely believes that the seed market is developing day by day with
awareness of quality seed by the farmers and with limited land area the national challenge is to
ensure maximum production/yield in given area. This is where quality seed will play key role in
days to come.
C. Multipurpose Himadri Agro-processing Co. Ltd. (MHAL)
The company was formed in 2005 is located in Birgonj, Dinajpur with a view to get involved in
various agro-based businesses. Currently its activities are limited to cold storage of seed & table
potato and contract farming of processing variety potato. But in future it plans to expand its
contract farming program to produce aromatic rice, maize, soya bean, mustard seed, various spices,
etc. and contribute in backward linkage for our other food & agro processing units. It also has plan
to set-up automatic rice plant in its existing facility.
D. Ejab Foods Limited

The company was formed in 2006. Although it is yet to come into operation but it has empty plots
in baliadangi, thakurgaon and ashulia, Savar. The nature of business would be to produce
pasteurized milk, U.H.T. milk, milk based products like sweet, yoghurt, yoghurt drink, ice cream,
fruit juice, bottle water, rice bran oil, etc.
E. Ejab Alliance Limited
This cattle breeding farm is situated in Thakurgaon under the name Ejab Alliance ltd., established
in 2004. The activities include semen collection and processing it for Artificial Insemination to
improve the future variety of cattle in Bangladesh. At the moment we have 7 numbers of Australian
Holstein Frisian Bulls in our farm. It has more than 450 highly skilled Artificial Insemination
workers all over the country. This is the only project of its kind in private sector. Our rate of
success since its inception is higher than other Government and Non-Government Organization
owned establishment for such purpose. Nature of business is production of Semen from F1 & F2
generation Bull stock. Its future plan is to Composite Dairy Plant
F. Northern Agricultural & Industrial Co. Ltd.
i.

Sonapukur Unit

Sonapukur unit at Dinajpur, was established in 2010, adjacent to the flourmill. In this unit
following products are produced: Mustard Oil, cooking spices, Toast biscuits, vermicelli. Its future
plans include processing different fruits and vegetables grown in North Bengal, like mango,
tomato, olive, etc. into pickles and ketchup.
ii.

Uttam, Kellabondh, Rangpur Unit

NAICOL Rice Mill - Uttam, Kellabondh, Rangpur Unit was established in the year 2011. It is an
automatic rice mill with the facility of making Parboiled rice and Atop (unboiled) rice. It processes
fine Aromatic rice, coarse rice, for both local and Export market. Its future plans include expanding
the production capacity and processing rice bran into oil. Upcoming products include Quality
Miniket, Quality Nazirshail, NAICOL Chinigura, NAICOL Banglamoti

iii.

Ashulia, Savar Unit

7

NAICOL Ashulia, Savar Unit was established in the year 2005. It is a state of the art factory where
Custard cake, Candy, Spicy snacks, Potato snacks and Bombay Mix. Are produced. Future plans
include expansion of production units as per growing demand to meet the consumer satisfaction.
G. Rabeya Flour Mills Limited
Rabeya Flour Mills Limited established in 1978, is situated in Sonapukur (adjacent Syedpur
Town), Parbatipur, Dinajpur. It was one of the first major automatic flourmills in the country
producing fine flour, Coarse flour, Vitamin fortified Flour, Whole wheat flour, Semolina and Bran.
With the growing demand of our produce in the market, it has gone into expansion over the years.
Key brand is Quality and Rabeya. Future plans include setting up Feed mill, Woven PP, Leno
mesh bag industries
H. Munchy Food & Beverage Ltd.
"Munchy Food & Beverage Ltd." is an automatic biscuit industry situated at BISIC Industrial Area,
Moktarpur, Munshigonj. Future plans include product diversity and export.
I. Ejab Foods Limited
The company was formed in 2006. Although it is yet to come into operation, it has empty plots in
Baliadangi, Thakurgaon and Ashulia and Savar. The nature of business would be to produce
pasteurized milk, U.H.T. milk, milk based products like sweet, yoghurt, yoghurt drink, ice cream,
fruit juice, bottle water, rice bran oil, etc.
J.

Ejab Developers Ltd.

Ejab Developers Ltd. (EDL) always uses renowned, tested and certified building materials for its
projects. However, we also prefer the clients' choice on building material selection including
interior designs and fittings. We have a team of qualified and dynamic architects to meet the
clients dream and make it a reality with great integrity. It believes post-handover services to be
as important as the construction of your home. EDL always cares about the proper maintenance of
the complex with its routine supervision team to ensure the valued clients' safety and security. The
on-spot solution service for the clients' recommendations and instructions are always given FIRST
priority.
8

K. Ejab Distribution Ltd

The company was formed in 2007 with a vision to work as marketing company of the food
products produced in our different food units. Currently it has a sales team, depots in different
locations and vehicles covering the entire nation under this company. In 2008 Ejab Distribution
Ltd. came into an agreement with CEPSA Lubricants, Spain to market its petroleum products in
Bangladesh. Although contrast to its existing business, looking at the growing industrial market,
especially in power generation sector the company decided to venture in the business. When first
launched in the market we were focused in the automotive market but in past 3 years the focus has
shifted to industrial market and the response from our clients have been positive. It believes like
all other products even quality petroleum products will have opportunity in future with public
awareness and government regulation.
L. Ejab Trading Co. Ltd.
The company was formed in 2006 with a vision to do trading of commodities like wheat, maize,
rice, soya bean, mustard seed, etc. as these products are grown once in a year thus have seasonal
effect of price and availability.
2.2 Vision, Mission & Objective
2.2.1 Vision
To be one of the top 10 leading conglomerates by 2020 by providing superior quality products and
services and developing an enduring and transformational relationship with all key stakeholders
2.2.2 Mission
a. To provide growth and profitability to our shareholders.
b. To provide a challenging work environment this gives our employees pride and dignity.
c. To have a win-win growth for all our partners working with us.
d. To work with farmers as their caring long term partner.
e. To achieve market leadership and operating excellence by continuously providing our
consumer with quality product and services.

2.2.3 Objectives
a. To meet the latent demand of the consumers.
b. To increase growth through quality product & Service.
c. To maximize the utilization of existing wealth.
2.3 Corporate Social Responsibilities (CSR)
As Ejab Group has always been self-committed to help the under-privileged masses of the society,
particularly in the fields of education, building moral & religious values, growing up &
rehabilitation of orphans, we have established and still run a number of educational & religious
institutions and workshops in different places of Bangladesh. Ejab Group with its helpful hands
has always helped the poor in many ways by distributing rice, flour, clothes, even money to dowry
affected families. Ejab Group regularly conducts Workshops, Training Programs, and Seminars
etc. at its Project Sites. With a view to growing more crops under the auspices of Agricultural
Consultancy Division headed by Agro-graduates, these initiatives are aimed to touch every
farmers life with knowledge and awareness for better farming in order to enrich their lives. Its
institutions are as follows:
i.

Begum Rabeya Ahmed Girls High School, named after our Ex-Managing Director Begum
Rabeya Ahmed.

ii.

Samiruddin Memorial Degree College, named after our Founder Late Engr. Ejabuddin
Ahmeds father.

iii.

Hasina Memorial Child Orphanage, being run in memory of our Founder Managing
Director Late Engr. Ejabuddin Ahmeds mother.

iv.

Baitul Ejab Jame Mosque.

v.

Moheshmari Central Mosque.

vi.

Stipends to poor and Meritorious Students of Higher Studies under the banner of Emdad
Ahmed Afzal Memorial Trust and Begum Rabeya Ahmed Trust are provided.

vii.

Thakurgaon Diabetic Hospital.

viii.

Conducting Eye Camps at different places of Thakurgaon.

ix.

Hostel beside the Samiruddin Memorial Degree College

x.

Vocational Training Center (Proposed)

10

xi.

Child & Maternal Health Care Center in Moheshmari (Proposed)

3.0 Research Part

3.1 Literature Review
The comparison that shows the relationship between two amounts is basically known as ratio. The
major financial information of a business brought out from the balance sheet and income sheet so
that this statements are the principal sources that are mainly used to calculate the financial ratios
(Dong Jin Kim, 2006). Andrew and schmidgall (1993) categorized the financial ratios into
different types for the hospitality industry; Solvency ratios, Liquidity ratios, Profitability ratios
and Operating ratios. Comparison of financial ratios of different firms from different countries is
conducted by Meric et al. with the help of his collegues (Meric et all., 1997; 2002; 2004). There
are many scholars and researchers like Smith, 1997; Zaman & Unsal, 2000; Locke & Scrimgeour,
2003, also did the same study (Dond Jin Kim, 2006). Dong Jin Kim also concludes that the
comparison of financial characteristics of different industries from different countries is
understandable because the firms of these segments are intrinsically homogeneous. The result of
investigation by Andrew, (1993) through the leverage ratio of restaurants and hotels shows that in
restaurants segment the value maximizing capital structure would be between 45% and 55% but
in hotels this ratio would be between 55% and 60%.Hales J. (2005) argues that in hotels industry
to assess the future it is necessary to financial analyze the past performance of hotel. These analysis
reports should be daily, weekly, monthly and quarterly, but the monthly reports are more important
because these are examined by the internal as well as the external analysts. Jangels & Ralston
(2006) argue that the managers of internal operations, the shareholders of organization and current
creditors are those groups who are interested in the financial ratio analysis. Financial ratios permit
an analyst the right of use not just the absolute value of the relationship and also measure the
variance within the relationship (Lawder, 1989). From the management point of view the
justification for the use of financial ratio analysis is that we express many figures in the form of
ratios, and that information which is missed will be revealed after the individual members are
observed (Thomas & Evanson, 1987). And then that information can be used by the managers for
the improvement of their operations. Auditors can also use ratios for conducting an analytical
review of their clients (Gardiner, 1995). We get numerous amount of information from the balance

11

sheet and income statement, it is also possible to develop an infinite number of ratios and items
related to income statement and to each other, also items of balance sheet to each other, and as
well as with the items of one statement to the items of other statement. However, the various items
present in the financial statements are mostly highly correlated with each other so that the financial
ratios are highly correlated with one another (Horrigan, 1996; Zeller & Stanko, 1997).
3.2 Analysis
To analyze the financial performance of the companies at hand, we will delve into the composition
of assets, equity and liabilities of each company and compare the composition between year 2014
and 2015. We will then focus on scrutinizing the profitability of each company using four key
profitability ratios gross profit margin, net profit margin, return on assets and return on capital
employed. We will look into its liquidity through current ratio. Afterwards, focus would be shifted
to exploring the financial position of each company using three key financial position ratios
capital gearing ratio, debt ratio and interest cover. We will look into its efficiency through asset
turnover ratio. These would give us enough insight of the financial performance of the companies
in question and facilitate superior comparison.

3.2.1 Composition of Balance Sheet: Himadri Limited

Balance Sheet of Himadri Limited shows the current assets over total assets are 1% in 2014, and
non-current assets was 99%. In 2015, the current assets constituted 7% of the total assets and noncurrent assets was 93%. This shows the percentage of current assets increased by six units. The
following pi-charts clearly demonstrates the composition of assets:

12

Current
Assets
1%

Current
Assets
7%

2014

2015

NonCurrent
Assets
99%

NonCurrent
Assets
93%

In 2014, the total current liabilities 9% of the total equity and liabilities. Corresponding non-current
liabilities was 1%, and equity was 90%. In 2015, the total current liabilities 12% of the total equity
and liabilities. Corresponding non-current liabilities was 1%, and equity was 87%. The following
pi-charts clearly demonstrates the composition of equity and liabilities:

Current
Liabilitie
s
12%

2015

NonCurrent
Liabilitie
s
1%

Current
Liabilities
9%

2014

Equity
87%

NonCurrent
Liabilities
1%

Equity
90%

The balance sheet of Himadri Limited can be found in the appendix. The following diagram shows
the changes in Balance Sheet Account graphically and in more detail:

13

The changes in the main balance sheet accounts of Himadri

Limited
700,000,000

600,000,000

500,000,000

400,000,000

300,000,000

200,000,000

100,000,000

0
Non-Current Current Assets Total Assets
Assets
2015

Equity

Current
Liabilities

Non-Current Total Liabilities

Liabilities

2014

3.2.2 Composition of Balance Sheet: Golden Harvest Agricultural Industries Limited (GHAIL)
Balance Sheet of GHAIL shows the current assets over total assets are 35% in 2014, and noncurrent assets was 65%. In 2015, the current assets constituted 30% of the total assets and noncurrent assets was 70%. This shows the percentage of current assets decreased by 5 units. The
following pi-charts clearly demonstrates the composition of assets:

14

Current
Assets
30%

2015

2014
Current
Assets
35%

NonCurrent
Assets
65%

NonCurrent
Assets
70%

In 2014, the total current liabilities 27% of the total equity and liabilities. Corresponding noncurrent liabilities was 6%, and equity was 67%. In 2015, the total current liabilities 26% of the
total equity and liabilities. Corresponding non-current liabilities was 7%, and equity was 677%.
The following pi-charts clearly demonstrates the composition of equity and liabilities:

2015
Current
Liabilities
26%

NonCurrent
Liabilities
7%

2014
Current
Liabilities
27%

Equity
67%

NonCurrent
Liabilities
6%

Equity
67%

The balance sheet of GHAIL can be found in the appendix. The following diagram shows the
changes in Balance Sheet Account graphically and in more detail:

15

The changes in the main balance sheet accounts of GHAIL

3,500,000,000

3,000,000,000

2,500,000,000

2,000,000,000

1,500,000,000

1,000,000,000

500,000,000

0
Non-Current Current Assets Total Assets
Assets
2015

Equity

Current
Liabilities

Non-Current Total Liabilities

Liabilities

2014

3.2.3 Assessment of Financial Ratios

To evaluate the strength and weakness of company and to evaluate the trend of business the ratios
are very helpful. We will scrutinize the profitability of each company using four key profitability
ratios gross profit margin, net profit margin, return on assets and return on capital employed.
We will look into its liquidity through current ratio. Afterwards, focus would be shifted to
exploring the financial position of each company using three key financial position ratios capital
gearing ratio, debt ratio and interest cover. We will look into its efficiency through asset turnover
ratio. These would give us enough insight of the financial performance of the companies in
question and facilitate superior comparison.

16

3.2.3.1 Profitability Ratios

A profitability ratio is a measure of profitability, which is a way to measure a company's
performance. Profitability is simply the capacity to make a profit, and a profit is what is left over
from income earned after costs and expenses related to earning have been deducted from the
income.

A. Gross Profit Margin

This ratio is used to assess a firm's financial health by revealing the proportion of money left over
from revenues after accounting for the cost of goods sold. Gross profit margin serves as the source
for paying additional expenses and future savings. The following table shows the gross profit
margin of Himadri Limited and GHAIL:
Himadri

GHAIL

2015

2014

2015

2014

Sales Revenue

80250145

33108874

256,095,176

184,546,936

Gross Profit

32,277,457

-14,381,574

111,367,441

63,685,302

Gross Profit Margin

0.4022

-0.4344

0.4349

0.3451

Himdris revenue in 2015 is much higher than it is in 2014. In 2015, it made some profit although
in 2014 it made loss. It recovered in 2015. Therefore, its gross profit margin in 2015 is positive,
while in 2014 it is negative. For every taka earned in 2015, Taka 0.4022 gross profit was made.
For every taka earned in 2014, Taka 0.4344 worth of loss was incurred. The corresponding figures
for GHAIL are similar in 2015. Hence, compared to GHAILs gross profit margin, the Himadris
is similar in 2015. The following chart clearly depicts the differences:

17

2014

GHAIL

0.3451

2015

0.4349

2014

Himadri

-0.4344

2015

-0.6000

-0.4000

-0.2000

0.0000

0.4022
0.2000

0.4000

0.6000

Gross Profit Margin

B. Net Profit Margin

()

Net profit margin is the percentage of revenue left after all expenses have been deducted from
sales. The measurement reveals the amount of profit that a business can extract from its total sales.
The following table shows the net profit margin of Himadri Limited and GHAIL:
Himadri

GHAIL

2015

2014

2015

2014

Sales Revenue

80,250,145

33,108,874

256,095,176

184,546,936

Net Profit

583,797

-46,800,819

9,350,195

18,516,750

Net Profit Margin

0.0073

-1.4135

0.0365

0.1003

Himdris revenue in 2015 is much higher than it is in 2014. In 2015, it made some profit although
in 2014 it made loss. Therefore, its gross profit margin in 2015 is positive, while in 2014 it is
negative. For every taka earned in 2015, Taka 0.0073 net profit was made. For every taka earned
18

in 2014, Taka 1.4135 worth of net loss was incurred. The corresponding figures for GHAIL are
favorable. Hence, compared to GHAILs net profit margin, the Himadris is below par. The
following chart clearly depicts the differences:

2014

GHAIL

0.1003

2015

0.0365

2014

Himadri

-1.4135

2015

0.0073

-1.6000 -1.4000 -1.2000 -1.0000 -0.8000 -0.6000 -0.4000 -0.2000 0.0000

0.2000

Net Profit Margin

C. Return on Assets (ROA)

The return on assets ratio, often called the return on total assets, is a profitability ratio that measures
the net income produced by total assets during a period by comparing net income to the average
total assets. In other words, the return on assets ratio or ROA measures how efficiently a company
can manage its assets to produce profits during a period. Since company assets' sole purpose is to
generate revenues and produce profits, this ratio helps both management and investors see how
well the company can convert its investments in assets into profits. The following table shows the
return on assets of Himadri Limited and GHAIL:

19

Himadri

GHAIL

2015

2014

2015

2014

Operating Profit

12,491,951

-33,001,732

78,261,099

29,332,086

Total Assets

632,700,684

609,006,401

1,811,195,450 1,381,142,334

Return on Assets

0.0197

-0.0542

0.0432

0.0212

In 2015, Himadri made some profit although in 2014 it made loss. Its assets did not change much
in two years. Therefore, its ROA in 2015 is positive, while in 2014 ROA is negative. In 2015,
every taka worth of asset earned Taka 0.0197. In 2015, every taka worth of asset made a loss of
Taka 0.0542. The corresponding figures for GHAIL are much favorable. Hence, compared to
GHAILs ROA, the Himadris is below par. The following chart clearly depicts the differences:

0.0212

GHAIL

2014

2015

0.0432

2014

Himadri

-0.0542

2015

-0.0600

-0.0400

-0.0200

0.0000

0.0197
0.0200

0.0400

0.0600

Return on Assets

D. Return on Capital Employed (ROCE)

20

Return on capital employed or ROCE is a profitability ratio that measures how efficiently a
company can generate profits from its capital employed by comparing net operating profit to
capital employed. In other words, return on capital employed shows investors how many takas in
profits each taka of capital employed generates. ROCE is a long-term profitability ratio because it
shows how effectively assets are performing while taking into consideration long-term financing.
This is why ROCE is a more useful ratio than return on equity to evaluate the longevity of a
company. The following table shows the return on capital employed of Himadri Limited and
GHAIL:
Himadri

GHAIL

2015

2014

2015

2014

Operating Profit

12,491,951

-33,001,732

78,261,099

29,332,086

Capital Employed

555,019,215 555,335,418 1,256,849,656 992,715,658

Return on Capital Employed

0.0225

-0.0594

0.0623

0.0295

In 2015, it made some profit although in 2014 it made loss. Its capital employed did not change
much in two years. Therefore, its ROCE in 2015 is positive, while in 2014 ROA is negative. In
2015, every taka worth of capital employed generated Taka 0.0225. In 2015, every Taka worth of
capital generated a loss of Taka 0.0594. The corresponding figures for GHAIL are greater. Hence,
compared to GHAILs ROCE, the Himadris is below par. The following chart clearly depicts the
differences:

21

2014

GHAIL

0.0295

2015

0.0623

2014

Himadri

-0.0594

2015

-0.0800

-0.0600

-0.0400

-0.0200

0.0000

0.0225
0.0200

0.0400

0.0600

0.0800

Return on Capital Employed

3.2.3.2 Liquidity Ratios

Liquidity ratios analyze the ability of a company to pay off both its current liabilities as they
become due as well as their long-term liabilities as they become current. In other words, these
ratios show the cash levels of a company and the ability to turn other assets into cash to pay off
liabilities and other current obligations. Liquidity is not only a measure of how much cash a
business has but also a measure of how easy it will be for the company to raise enough cash or
convert assets into cash. Assets like accounts receivable, trading securities, and inventory are
relatively easy for many companies to convert into cash in the short term. Thus, all of these assets
go into the liquidity calculation of a company. Current ratio is the most prevailing measure of
liquidity.
A. Current Ratio

The current ratio is a financial ratio that shows the proportion of current assets to current liabilities.
The current ratio is used as an indicator of a company's liquidity. In other words, a large amount
22

of current assets in relationship to a small amount of current liabilities provides some assurance
that the obligations coming due will be paid. The following table shows the current ratios of
Himadri and GHAIL:
Himadri

GHAIL

2015

2014

2015

2014

Current Assets

41,608,891

6,181,182

432,130,850

503,780,024

Current Liabilities

77,681,469

53,670,983

554,345,794

388,426,676

Current Ratio

0.5356

0.1152

0.7795

1.2970

Current assets of Himadri in 2014 was low compared to its current assets. Hence, its current ratio
in that year was a mere 0.1152. In 2015, current assets increased significantly with slight increase
in current liabilities. Hence, current ratio increased. Yet the ratio is not up to the mark compared
to GHAIL. The following chart clearly depicts the differences:

2014

GHAIL

1.2970

2015

0.1152

Himadri

2014

0.7795

2015

0.0000

0.5356
0.2000

0.4000

0.6000

0.8000

1.0000

1.2000

1.4000

Current Ratio

3.2.3.3 Financial Position Ratios

These ratios help in the analysis of financial position of the company and in determining the
stability of the company and the ability of the company to repay its long-term debts.
A. Capital Gearing Ratio

23

Gearing focuses on the capital structure of the business that means the proportion of finance that
is provided by debt relative to the finance provided by equity (or shareholders). The gearing ratio
is also concerned with liquidity. However, it focuses on the long-term financial stability of a
business. Gearing (otherwise known as "leverage") measures the proportion of assets invested in
a business that are financed by long-term borrowing. In theory, the higher the level of borrowing
(gearing) the higher are the risks to a business, since the payment of interest and repayment of
debts are not "optional" in the same way as dividends. However, gearing can be a financially sound
part of a business's capital structure particularly if the business has strong, predictable cash flows.
The following table shows the capital gearing ratios of the companies:
Himadri

GHAIL

2015

2014

2015

Total Long-term Debt

7,717,065

7,717,065

645,691,000 397,294,125

Share Holders Fund

547,302,150 547,618,353 611,158,656 595,421,533

Capital Gearing Ratio

0.0141

0.0141

1.0565

2014

0.6672

Himadris long term debt and share holders remained same in both the years. Long term debt is
much lower than share holders fund. Hence, capital gearing ratio is only 0.0141 in both the years.
Himadri can easily pay off its long term debt. Hence, immediate chances of bankruptcy is
negligible. Nevertheless, it is not leveraging enough. GHAIL on the other hand has optimum
gearing ratios. The following chart clearly depicts the differences:

24

2014

GHAIL

0.6672

2015

1.0565

0.0141

2015

0.0141

Himadri

2014

0.0000

0.2000

0.4000

0.6000

0.8000

1.0000

1.2000

Capital Gearing Ratio

B. Debt Ratio

This ratio measures the extent of a companys leverage. The debt ratio is defined as the ratio of
total long-term and short-term debt to total assets, expressed as a decimal or percentage. It can
be interpreted as the proportion of a companys assets that are financed by debt. The following
table shows the debt ratios of Himadri and GHAIL:
Himadri

GHAIL

2015

2014

2015

2014

Total Assets

632,700,684

609,006,401

1,811,195,450

1,381,142,334

Total Liabilities

85,398,534

61,388,048

1,200,036,794

785,720,801

Debt Ratio

0.1350

0.1008

0.6626

0.5689

Himadri finances an insignificant portion of its assets using debt. The debt ratios of Himadri are
around six times lower than those of GHAIL. Himadri is not maximizing on its opportunities to
take more loan. The following chart depicts the differences:
25

2014

GHAIL

0.5689

2015

0.6626

2014

Himadri

0.1008

2015

0.1350

0.0000

0.1000

0.2000

0.3000

0.4000

0.5000

0.6000

0.7000

Debt Ratio

C. Interest Cover

( )

Interest cover or interest coverage ratio measures the ability of a company to pay the interest on
its outstanding debt. This measurement is used by creditors, lenders, and investors to determine
the risk of lending funds to a company. A high ratio indicates that a company can pay for its interest
expense several times over, while a low ratio is a strong indicator that a company may default on
its loan payments. The following table shows the interest coverage ratios of Himadri and GHAIL:
Himadri
2015

GHAIL
2014

2015

2014

Operating Profit

12,491,951 -33,001,732 78,261,099

29,332,086

Interest Expenses

11,908,154 13,799,087

64,630,475

6,093,851

Interest Cover

1.0490

1.2109

4.8134

-2.3916

26

Himadri is not generating enough profit to cover its interest in 2014. In 2015, the profit is more
than enough for that. GHAIL, on the other hand, makes sufficient profit to cover its interest both
the year. The following chart depicts the differences:

2014

GHAIL

4.8134

2015

1.2109

2014

Himadri

-2.3916

2015

-3.0000 -2.0000 -1.0000

1.0490

0.0000

1.0000

2.0000

3.0000

4.0000

5.0000

6.0000

Interest Cover

3.2.3.4 Efficiency Ratios

Efficiency ratios also called activity ratios measure how well companies utilize their assets to
generate income. Efficiency ratios often look at the time it takes companies to collect cash from
customer or the time it takes companies to convert inventory into cashin other words, make
sales. These ratios are used by management to help improve the company as well as outside
investors and creditors looking at the operations of profitability of the company. Efficiency ratios
go hand in hand with profitability ratios. Most often when companies are efficient with their
resources, they become profitable. A key efficiency ratio is asset turnover ratio.
A. Asset Turnover Ratio

27

The asset turnover ratio is an efficiency ratio that measures a company's ability to generate sales
from its assets by comparing net sales with average total assets. In other words, this ratio shows
how efficiently a company can use its assets to generate sales. The total asset turnover ratio
calculates net sales as a percentage of assets to show how many sales are generated from each taka
of company assets. The following table shows the asset turnover ratios of Himadri and GHAIL:
Himadri

GHAIL

2015

2014

2015

2014

Sales Revenue

80,250,145

33,108,874

256,095,176

184,546,936

Total Assets

632,700,684

609,006,401

1,811,195,450

1,381,142,334

Asset Turnover Ratio

0.1268

0.0544

0.1414

0.1336

Asset turnover ratios for Himadri and GHAIL are comparable. Himdris assets are generating
sufficient revenue. Himadris ratio increased from 2014 to 2015, while GHAILs remained similar.
The following chart depicts the differences:

2014

GHAIL

0.1336

2015

0.1414

2014

Himadri

0.0544

2015

0.0000

0.1268
0.0200

0.0400

0.0600

0.0800

0.1000

0.1200

0.1400

0.1600

Asset Turnover Ratio

28

4.0 Findings
A. Findings from Profitability Analysis

Results from Profitability Analysis

1.0000
0.5000
0.0000
2015
-0.5000

2014

2015

2014

Himadri

GHAIL

-1.0000
-1.5000
-2.0000
Gross Profit Margin

Net Profit Margin

Return on Assets

Return on Capital Employed

GHAIL has a quite healthy profitability. Himadry, on the other hand, made loss in 2014. It
recovered and made profit in 2015 although all the profitability ratios for Himadri may not seem
propitious. Based on these mere numbers, keeping Himadri in operation seems futile.
B. Findings from Liquidity Analysis

Results from Current Ratios

1.4000
1.2970
1.2000
1.0000
0.8000
0.6000

0.7795
Current Ratio

0.5356

0.4000
0.2000

0.1152

0.0000
2015

2014
Himadri

2015

2014
GHAIL

29

GHAILs liquidity position is strong. Himadris liquidity position, on the other hand, is not up to
the mark. Its current assets do not match its current liabilities. GHAILs liquidity position is
healthy. Hence, the chart accentuates Himadris ill liquidity position.
C. Findings from Financial Position Analysis

Results from Financial Position Analysis

6.0000
5.0000
4.0000
3.0000
2.0000
1.0000
0.0000
-1.0000
-2.0000

2015

2014

2015

Himadri

2014
GHAIL

-3.0000
Capital Gearing Ratio

Debt Ratio

Interest Cover

Himadri has much higher level equity compared to its debt. Hence, it can make use of the
opportunity of taking more loans if it has access to better investment or growth opportunity.
Although its operating profit did not exceed its interest expense in 2014, in 2015 the operating
profit was more than enough for that.

30

D. Findings from Efficiency Ratios

Findings from Efficiency Ratio

0.1600
0.1414

0.1400
0.1200

0.1268

0.1336

0.1000
0.0800
0.0600

Asset Turnover Ratio

0.0544

0.0400
0.0200
0.0000
2015

2014
Himadri

2015

2014
GHAIL

Himadris asset turnover ratio is comparable to that of GHAL, in 2015. Both firms have
experienced an increase in efficiency from 2014 to 2015, although Himadris improvement
was steeper. This shows a beacon of light for Himadri.

31

5.0 Recommendations and Conclusion

The alternatives available for Ejab Group, Himadris mother entity, include:
i.

Liquidating Himadri Limited and invest in other more profitable ventures

ii.

Make use of its opportunity to take more loans against Himadris large asset base and invest
in Himadri

I would recommend the second one for three cogent reasons. First, Himadri, although not as
efficient as GHAIL, has enough efficiency. Moreover, its efficiency has grown from 2014 to 2015
significantly. This is apparent from its asset turnover ratio. Second, from 2014 to 2015,
profitability conditions got only healthier insinuating potential for more improvement. Third,
liquidating the business would not yield enough cash since most of Himadris assets include
property, plant and equipment and currently land price is on decline. Nevertheless, offering a
much specific and superior suggestion would demand a comprehensive study of the industry and
the environment which is beyond the scope of this study. Besides, deficiency of pertinent
information impinged on this study as well. Yet this study might aid further, more comprehensive
research.

32

Appendix

33

34

35

36

37

38

39

40

Reference
http://www.ejabgroup.com/
http://www.ejabgroup.com/himadri.php
http://www.goldenharvestbd.com/
http://www.goldenharvestbd.com/golden-harvest-agro-industries-ltd/
http://lankabd.com/
http://www.investopedia.com/

41